First State Bank v. Lincoln

Mayes, C. J.,

delivered the opinion of the court.

On the 21st day of July, 1905, certain creditors of the Columbus Chair Company filed a petition in the bankrupt -court seeking to have the chair company adjudged a bankrupt. On the 18th day of August following the adjudication was made, and on the 30th day of the same month the creditors elected C. L; Lincoln trustee. After the selection of Lincoln as trustee, and while acting as such, Lincoln filed a bill in the chancery court of Lowndes county, in which it is alleged that the First State Bank had received from the chair company, within four months before the filing of the petition, preferences amounting to several thousand dollars. The bill charges that, at the time of the receipt of the alleged preferences by the bank, the chair company was insolvent and its condition was known to the bank, and that the payments were made for the purpose of hindering, delaying, and defrauding other creditors, and of preferring the bank, and that the bank knew, or had reasonable cause to' know that it was the intention of the chair company to give it preference over *725 •other creditors. The bill further charges that since the adjudication in bankruptcy all the the property belonging to the chair ■company has been sold and applied to certain debts of creditors holding liens thereon, and there still remains $14,000 due general creditors, which has been approved and allowed in the bankruptcy court; but they cannot realize anything on their debts unless the State Bank is required to pay back such sums as it received as stated above. The petition concludes with the prayer that the bank be required to account for the amount of money transferred to it by the chai^ company while insolvent and within four months prior to the filing of the petition, and that on final hearing the bank be required to pay to the trustee all said money received by it. It will be seen from the above that a part of the relief sought by the bill is to require the bank to account and disclose to the trustee what amount it had received during the four months. The bank filed an answer in denial of all the material allegations contained in complainant’s bill, denying’ the insolvency of the chair company at the time it received any money from it, and denying that it was the intention of the chair company to prefer it, or that it knew or had reason to believe such was the purpose on the part of the chair company.

A great deal of testimony is to be found in the record on both sides of this controversy, but at the conclusion the chancellor entered a decree against the bank for $2,743.78, with interest from June 6, 1906, the date of the bill, and also taxed the bank with the costs. It conclusively appears that the net -•amount received by the bank and applied on a debt owing it by the chair company, within the four months, was $2,743.78. The facts warranted the chancellor in rendering this decree, ••and we cannot disturb his findings, unless it is manifest error; ;and this we cannot say. ■

An opinion in the case would be unnecessary, were it not for *726 the fact that counsel for appellant so earnestly insist that they have a right to have a jury pass on certain questions which will be stated. It appears that after the answer was filed, and the cause came on for trial, appellant moved the court to-submit to a jury: (1) Whether or not, at the time of the receipt of the money by it from the chair company and the application of same to the debt of the chair company with the bank, the chair company was insolvent; and (2) whether or not, at the time of the receipt of the money by the bank, it knew or had reasonable cause to believe, that the chair company was insolvent. The above motion was overruled, and a jury denied, and the chancellor proceeded to try the cause, sitting as trier of both fact and law, as in all other chancery suits. It is insisted that the right of trial by jury on these propositions was a right which the bank could insist upon, and which the court could not deny.

In determining this question it will be well to notice, first, the law of the state in regard to when a jury may be awarded in a trial in the chancery court. Section 558 of the Code of 1906 provides that: “The chancery court, in a controversy pending before it, and necessary and proper to be tried by a jury, shall cause the issue to be made up in writing,” etc. This section of the Code is a practical rescript of the statutes on the same subject in Ann. Code 1892, § 507, and Rev. Code 1880, § 1836, and differing from Rev. Code 1871, § 1032, only in phraseology, and not in substance. In the case of Pittman v. Lamb, 53 Miss. 594 , and Carradine v. Carradine, 58 Miss. 293 , 38 Am. Rep. 324 , this court has expressly held that the granting or refusing of a jury by the chancellor was discretionary, and the law announced in those cases, although decided under the Code of 1871, is as applicable to jury trials under section 558 of the Code of 1906 as it was under section 1032 of the Code of 1871. The statute merely gives authority to the chancery court to summon a jury in a case deemed by it to be necessary and proper *727 to be tried by a jury, but leaving the court to determine in what case it shall deem a jury trial “necessary and proper.” It is not a matter of right to be demanded by a litigant. The bill made out a case of equitable jurisdiction pure and simple. It asked for an accounting — a subject of well-recognized equitable jurisdiction.

Unless the bankruptcy law compels the state court to submit the questions propounded by appellant to the determination of a jury, it is clear that it was not necessary under the state law. Let us examine the federal law on this subject. Under the provisions of section 60b of the bankruptcy law (Act July 1, 1898, ch. 541, 30 Stat. 562 [U. S. Comp. St. 1901, p. 3445]) and section 70e, as amended by Act Feb. 5, 1903, ch. 487, § 16, 32 Stat. 800 (U. S. Comp. St. Supp. 1909, p. 1316), it is provided ’that suits for the recovery of a preference may be brought “in any court of bankruptcy, as hereinbefore defined, and any state court which would have had jurisdiction if bankruptcy had not intervened,” each having concurrent jurisdiction. When the bankruptcy law conferred upon the state courts concurrent jurisdiction with the bankruptcy courts in suits by trustees to recover preferences, it did not repeal, alter, or modify the rules of practice by which the courts of the state are regulated and controlled, but left the states to the practice and procedure by which they were governed in the settlement of any and all controversies within their jurisdiction. A suit by a trustee to recover a preference is not in any sense a “proceeding in bankruptcy.” It is merely a suit to recover from the preferred creditor what such creditor has acquired under circumstances prohibited by the bankruptcy law. Loveland on Bankruptcy (3d ed.), p. 618, § 203a. The United States courts have regulated the procedure to be. followed in this character of cases, where the suit is instituted in the bankruptcy court; but the declaration of the federal courts on this subject is only intended to apply to suits in such courts, and has no bearing on the procedure *728 of the state courts, if the trustee brings the suit there. In so doing the federal courts are but following the statutes of the United States prescribing what shall be the practice there. The Revised Statutes of the United States (U. S. Comp. St. 1901, p. 583) provide that “suits in equity shall not be sustained in either of the courts of the United States in any case where a plain, adequate, and complete remedy may be had at law,” and the bankruptcy courts have steadily refused to entertain suits by trustees to recover preferences on the equity side of the court, unless the conditions prescribed by the statute constituting the fight to go into the equity court existed.

But, even if this law applied to the state court, which we say does not, it would not apply here, for the reason that this suit requires an accounting, a jurisdiction which is peculiarly one of equitable cognizance. In section 203a, Loveland on Bankruptcy, it is said that a suit “to recover property conveyed by the bankrupt in fraud of the act, either as a preference or a fraudulent conveyance, is not a proceeding in bankruptcy. For this purpose there must be a plenary suit at law or in equity, according to the nature of the case. Such suits may be actions at law in ejectment, trover, assumpsit, etc., or suits in equity, as a -bill to set aside a fraudulent conveyance, etc. What kind of a suit will lie to recover property for the estate of a bankrupt depends upon the law governing the practice in the particular court in which the suit is brought.” Again, in Collier on Bankruptcy (7th ed.), p. 67f, par. 6, it is said that “the practice in such suit is regulated by the rules applicable to the court in which they are brought.”

Cases cited by counsel for appellant, in seeming conflict with the court’s holding in this case, have no application here for the reason that they are eases from federal courts declaratory of their own practice. The cases of Scott v. Neely, 140 U. S. 106 , 11 Sup. Ct. 712, 35 L. Ed. 358 , and Cates v. Allen, 149 U. S. *729 451 , 13 Sup. Ct. 883, 977, 37 L. Ed. 804 , merely hold that, where a suit is instituted in a federal court for the purpose of ■enforcing a right created under the statutes of a state, the mode •of its enforcement by the federal court will be in accordance with the procedure by which the federal court is regulated, rather than that of the state, where there is inconsistency béJ tween the procedure of the two courts. The court observes as follows: “The state legislatures certainly have no authority to prescribe the forms and modes of proceeding in the courts of the United States; but having created a right, and at the same time prescribed the remedy to enforce it, if the remedy prescribed is substantially consistent with the ordinary modes of proceeding, no reason exists why it should not be pursued in the •same form as in the state courts.” But the courts of the United 'States have no more attempted to control the procedure in the ■state courts, where the suit is instituted in the state court, than they have submitted to the procedure when inconsistent with the federal procedure. In all cases, the constitutional validity of .the state’s procedure in any particular case has up to this time been left for the state courts to settle.

We do not deem it necessary to discuss the questions raised on ■cross-appeal. It is our judgment that the decree of the chancellor is correct on .both direct and cross appeal, and it is affirmed as to both. - Affirmed.